Sunday, May 31, 2009


This weekend, the Dow Jones Industrial Average is doing its best to become an even worse index. The Dow is:

  1. Price weighted. A stock that trades at $50/share will have twice the weighting as a stock that trades at $25/share, regardless of the sizes of the companies
  2. There are only 30 companies in the index

Because of the above two reasons there is almost no money indexed to the Dow, but it's a widely-watched average so its composition should merit some thought. Since there are only 30 members, each one is more important, no?

General Motors is bankrupt so it's got to come out. That probably means that Ford goes in, which makes some sense. What also makes sense would be adding Apple or Google instead. There is less manufacturing, more technology in the U.S. economy these days. That being said, the chatter this weekend is that their (Apple and Google) share prices are so high that adding either would cause disruption.

There has been so much disruption in the economy that one of the 30 most significant companies in the land went busto. In order to minimize disruption in their precious index, the folks at GM are looking for a 75 cent stock to replace GM.

edit 6/1 @ 9:30 - Looks like they added CSCO. Could have been worse.

Saturday, May 30, 2009

This Guy

David Einhorn of Greenlight Capital got Lehman right on the short side, correctly identifying the fact that their balance sheet was a house of cards. He bears listening to. He also could brag all day long if he wanted. Instead, he gave a very thoughtful speech at a conference this week.

Since I'd like to think that we will all learn something from the financial near-Armageddon of the last two years, I'll highlight the following:

"We all lost when the authorities failed to insist that Lehman recognize its losses...The authorities did not want to be held responsible for intervening and causing losses to Lehman equity holders. Instead they waited and hoped...Hope is a nice human emotion but does not make for good public policy."



YTD, leveraged loans (+26.0%), high yield bonds (+24.2%), convertibles (+14.7%), and high grade corporate bonds (+8.0%, rate hedged) continue to outpace most other assets (from some Citigroup research that someone pointed out to me.)
We are five months into the year and it certainly looks like the appetite for risk has returned to this market.

Of late, the dollar has been moving lower and U.S. rates have been moving higher. From where I sit it looks like consensus is that the market is frowning on U.S. economic policy including the size of the balance sheet and the rate at which money is being printed.

Another possibility is that the global market is pricing in the end of the financial crisis and recession, and no longer needs the U.S. safe haven cash and bonds. I dunno.

Friday, May 29, 2009

Yowsa Rip Rip

I hope you were in a Clubhouse or on your boat or at an early happy hour during the last 10 minutes of trading today. The U.S. markets ripped higher, but if you're reading this you know that.

There is a vigorous debate going on in the blogsphere and the financial media right now about whether the move amounted to last-day-of-the-month market manipulation. My guess is that some big big guy was short and couldn't take it any more. Had he been short since early March, and getting buried, the extra percent or so that he lost to get flat is probably tolerable. I didn't see too many individual moves that were remarkable so it probably wasn't some one or group marking their own book.

Enjoy the weekend.


10 years is a long time.

I have been reading this morning about Microsoft's new search platform, Bing, and am decidedly not excited.
Maybe they caught up to Google. As I wrote earlier, that won't be enough.

IBM's stock has outperformed Microsoft's over the last 10 years, which to me is a big deal. Maybe Microsoft should switch from Google envy-based R&D game plan to a strategy that is more shareholder-friendly.

The Economy, Stupid

There is a poll at the WSJ online over here this morning asking simply, "Is the economy on the mend?"

I was very surprised to see that 66% of respondents answered, "no." Stocks ave had a huge rally off the bottom and the banks are able to raise money and function again, both of those are good indications that things might be getting better. Oil is trading like buyers expect a better economy at some point within their investment horizon.

I guess it's still easy to be negative.


Meanwhile back at the U.S. equities ranch, futures are up again this morning. This market of late has got to be very frustrating if you aren't long it.

Thursday, May 28, 2009

Google is Annoying Me

Google rolled out, or at least talked about Google Wave today - what might be the basis for their next generation email and chat platform. See that kaleidoscope to the left for a visual. Yuck.

The idea as I've been reading it is to merge all forms of online communication into one very busy, noisy screen which is sure to drive me crazy.

I like email better than phones. You can send me a message and I get to answer when I want. I use IM and texting but don't want to be tethered to them, especially IM. Maybe not especially IM since I leave my phone in my car on purpose, often.
On top of that, I often don't log into IM when I'm online - like right now. No offense but I'm trying to do 4 things at once already. I don't need you hitting me up. My IM is kind of like my cell - I'm not logged into IM right now and I wouldn't answer my cell if it rang right now.

Gmail already has built in chat so if someone has my email address, they can ping me or bink me or whatever, whenever they want. I'm not a fan of where this is going.

Wednesday, May 27, 2009

Gamestop Stopped

A good question to ask yourself is, "What will I be if I'm forced to stop being what I was before?"

That <-- is a 3-year chart of video game retailer Gamestop. The company reported earnings last week and took down estimates for the remainder of the year by a lot, a move that shocked all the growth-at-any-price cabal who were crowded into the stock ahead of the quarter.

My gut is that Gamestop might not be a growth stock any more, and physically going to a bricks-and-mortar store to get a game might have hit the downside of the s-curve, or at least the peak. There are too many options now, most of which are obvious. Cell phone-based games are exploding. Computer-based games are having some kind of resurgence. Our Wii has internet access and I know I bought extra memory. I'm not sure why the kids can't buy downloaded games there.

The last bastion for in-the-store game purchases looks like it will be the handheld gaming devices. My boys, who are 10 and 11, don't shop/browse in stores for games any more. They know from online research and Game Informer and Nintendo Power magazines what they will buy before they get to the store. Might as well order it online.

The stock is cheap on next year's earnings. If I'm right those numbers are too high, though. Since the company chose to take numbers down aggressively rather than fighting it leads me to believe that they might have a plan. We'll see.

Tuesday, May 26, 2009

5/26 Thought of the Day

I have mixed feelings on this:

"You can apply this thinking [the impossibility of knowing that you're at the bottom] to the stock market, commodity markets, housing pricing -- really, just about anything "now." Simply put, you can't call the bottom. Don't try to. After the fact, we'll all see the bottom, and then some heroes can be anointed who correctly called the bottom, whether on their first try or their 15th. You are only as good as your last call."

That's Timothy Collins on and the words in parentheses are mine. The reason that I have mixed feelings is that there is a huge difference between calling a bottom for fame and notoriety, and making investment decisions based on levels and your view of direction from that level. The Case Shiller home price data this morning was not a change for the positive and yet if I were buying a home I would be OK doing so at this level. Am I calling a bottom? No/maybe/yes. Doesn't matter.

Likewise there are lots of stocks I like at this level. I think the March 9 low was probably the bottom but it does not have to have been the bottom for U.S. equities for one to make money on the long side from here. In my opinion.

Unintended Consequences

Maybe not. U.S. taxpayers are going to get the Morgan Stanley TARP money back with interest so Morgan is a nice little test tube in which we can look at how the limits on executive pay are working out. From the WSJ:

"Morgan Stanley Boosts Salaries as Its Bonuses Are Limited

Under the changes, managing directors will see about 25% to 30% of their overall compensation come from their base salary, up from about 15% to 20%, said a person familiar with the matter. A managing director making $250,000 in base salary could now see that salary rise to $400,000."

I don't believe that big bonuses were the biggest driver of the risks these folks took. That's like saying Michael Phelps won all those gold medals for the endorsement deals. This is just another example of a group of very smart individuals moving smoothly around the rules.

Getting as low as 15% of your total comp in base salary is a little ridiculous anyway.

Back to Work

When Tuesday is acting like Monday, that means you have a shorter week but it still means that you have to get back to work.

The GM situation (<-- dated but still...) did not improve over the weekend and the North Korea situation escalated so it makes sense that futures are weak this morning.

According to, GM is still 94% to delcare bankruptcy this calendar year.


Twitter TV? No thanks.

Watch for buzz around Microsoft's new search engine this week.


Morgan Stanley just upgraded Apple to buy with a $180 price target. The key? Lower iPod prices and share gains around the current holy grail - mobile internet access.

Me likey.

Monday, May 25, 2009

Handset History. I'm History

There is a cool pictorial article over here on the history of cell phones.

I'm so old that my first handset was that piece of analog junk to the left, circa 1998, at least in my case. In retrospect, I'm surprised I didn't get one earlier.

Microsoft vs. Google Ad Nauseum

Microsoft CEO Steve Ballmer has a tough job. Microsoft is set to roll out its new search engine, code named Kumo and now called Bing, this week.

Can Microsoft win the search engine battle? Ummm, the battle is over. Google won the battle because their search was obviously better and faster than what was out there. Under the current search paradigm, there is almost no reason for a user to switch to a similarly structured search engine because its results are a little bit better. How would a user even know?

One could decribe every bet that Microsoft makes against Google's entrenched position as risky, since they keep losing, or expensive yet riskless, since they will never win if they don't try. The aren't expected to win but they have lots of time and energy to try.

The twist this time is that Microsoft is going to spend $80 - 100 million on an ad budget for the rollout. As far as I have ascertained Microsoft is trying to sell you a new and different way to search, that isn't very different at all.

Look for a lot of ads from Mr. Softee in the coming months.

Sunday, May 24, 2009

5/24 Quote of the Day

From Jeremy Grantham's May 2009 letter, bemoaning among other things the fact that there is not likely to be another investable bubble any time soon.

"As my favorite quote by Mandelbrot (1983) says, “Even though economics is a very old subject, it has not truly come to grips with the main difficulty, which is the inordinate practical importance of a few extreme events.” If this last 10 years did not prove him right, nothing will."

Many professional investors who made a killing in the last decade or so did it by identifying a one-directional megatrend (it was a bubble but that's OK) and riding it for as long as possible. You can outperform the S&P 500 by 200 basis points per year til the cows come home and it doesn't compare - not even close - to getting one big call right given the economics of the business. Unless you have a secret, like doing something illegal.

Now that all of the bubbles have broken, hitting home runs will be a lot harder.

Saturday, May 23, 2009


You may be thinking, after reading the title of this post, that I am a weak-minded soul who allows himself to be defined by the calendar.

Ha ha. Not so. I do enjoy the weekends though, and because of that, I offer you the following joke.

A construction worker named Chow Fun woke up sick one day. He called his boss, “Hey boss. Chow fun here. I sick. I no work today.”

His boss replied, “Chow Fun, we really need you today. We are two weeks behind on this job. Chow Fun, when I feel that way, I tell my wife that I need sex. After that, I always feel better.”

Chow Fun said, “OK boss, I try. I call you later.”

A couple of hours later Chow Fun calls back, “Hey boss, I did you say. I feel better. I come work now.”

The boss says smugly, “That’s great Chow. I told you it would work. See you soon.”

Chow finishes by saying, “Hey boss, you got nice house.”

Every Hero Needs a Nemesis

This critter on the left is a reasonable facsimile of my neighbor.

I have two problems. The first problem is that by "neighbor", I mean that it lives under my front step. The second is that my wife knows that the critter is there, and wants him or her gone.

I borrowed a Hav-a-hart trap, in order to effortlessly and painlessly (for him) capture 'lil fella humanely and release him in somebody else's yard. My problem is that my downstairs neighbor has some mad skills in the structural engineering department, and has figured out how to get the fruit out of the trap without tripping the door.

The wife and kids are leaving for Grandma's house this morning so other than playing golf, the interloper will be my priority today.

Wish me luck.

Friday, May 22, 2009, Software on demand darling and on the come beneficiary of the cloud computing bonanza which is just around the corner reported last night and missed.

The stock is going to get hammered today and highlights the risk of owning this kind of name in this kind of environment. is still growing and therefore has become very overowned by the folks who have to own growth stocks. And very expensive. There's a sexy open-endedness to the cloud opportunities.

A very smart Wall Street guy wrote the following this morning:

"To be fair, this one didn't have much of a chance, even if the numbers had been OK -- way too many edgeless, positive previews heading into last night's event and the stock was trading at a 100% premium to the group -- tough combo."

As my grandmother likes to say, "There you go."


Is the Friday before Memorial Day weekend the official/unofficial first day of summer? It sure feels like it. At 6:00 am it is 52 degrees already in sunny Central New Jersey.

I played an awesome one-day member/guest yesterday at Trenton Country Club. That is the stately Clubhouse to the left. The course was in great shape, the company was great, the weather was perfect, the pace of play was great. Thanks MC. Sorry about the 38-or-so putts I took.


I for one am happy that temporary AIG Chief Edward Libby is stepping down, and soon. On March 19 I wrote the following:

"Ed Liddy, the volunteer, out-of-retirement, pro bono CEO of AIG got treated very unfairly by some on the hill yesterday. Shame on those populist jokers."

I think the jokers I was referring to was the Congressional Finance Committee. Something like that. AIG was a giant fraud when operating unfettered by intelligent oversight. Now it is a giant mess. Good luck to the government in finding someone more competent to clean it up.

Thursday, May 21, 2009

Quote of the Day

"Neither Cassandras or Pollyannas are money-makers; they are attention-getters."

Doug Kass over at on Cassandra-du-jour Nouriel Roubini, who I gather was on TV somewhere this morning (glad I missed it) declaring once again the end of the financial world as we know it.

Stay flexible, folks.

Ebb and Flow

The battle continues but the bears won yesterday. The market opened up nicely on good news then rolled over at around 10:30 and closed down on the day.

If you are a bear and the ongoing weakness in the financials is key to your theses, BofA's successful offering Tuesday evening was very bad news indeed. That cohort needed the market to roll over yesterday.

If you're a bull, you got the best possible news from BofA and the market went down. Ugh.

The market is still up a lot in thae last 10 weeks or so. We were/are going to have a correction at some point, even if this is a new bull market. Futures are looking weak but I remain in the cautiously optimistic camp.

Wednesday, May 20, 2009

Arthur Levitt

Former Head of the SEC Artur Levitt was on Bloomberg Radio this morning and was addressing the chatter around whether the SEC or the Federal Reserve would be the primary financial market regulator going forward (with the SEC losing some power in the process).

The idea with the above as I understand it is that if some institutions are too big to fail and therefore the Fed has to step in if the crap hits the fan, giving the Fed more oversight before such events takes place make sense. So far so good.

What shocked me about the interview was that Levitt said something very much like, "The SEC's job is to prosecute crime, not to anticipate and prevent it." I guess that gives them a free pass on being late to the party with almost every major financial scandal in his eyes. Not in mine.

Zero Would Be Good

Housing starts came in at a lower than expected number yesterday, fewer than 500k per year. The number was and is being viewed as bad by the media, and this is something I have discussed before.

Zero housing starts would be better than any positive number for the house price bottoming process, which is happening anyway. Bottoming home prices will be good for the consumer, which will be good for everyone.

Bank of America

It's amazing that BofA is trading up early in Europe after selling $13.5 billion of stock last night after the market close. That's a lot of stock and clearly sends the signal that the banks are out of the woods.


Hewlett Packard reported basically in line but there were some disappointing elements to the quarter- demand is weak, nobody prints any more etc. It looks like the stock will trade down a little today, at least at the open, but not much has changed for the longer term.


Futures are up a little as a welcome long weekend inches closer.


I'm very interested to see what will happen in California now that Schwarzenegger's budget bells and whistles failed yesterday. California needs to get help from somewhere and I don't think New Jersey's deficit problem is much better.

Tuesday, May 19, 2009

This Too Should End Well and Other Stuff

Look who has no idea how bad the job market is right now... Or maybe she knows that unemployment has bottomed. LA Times link here.

"A lawsuit filed in San Diego County Superior Court on Friday accuses Costco Wholesale Corp. of breaking California labor law by routinely keeping employees from going home each night for 15 minutes as managers remove jewelry from cases and check registers.

The policy, the suit says, amounts to false imprisonment.

The lawsuit, seeks at least $50 million in punitive damages..."


Let me take a moment to clarify my view of the equity markets, since I know I tend to look at most sides of the issues and therefore might sound like I'm hedging or waffling from time to time.

I think the March 9 bottom was the bottom for this bear market. Unemployment is the sole U.S. economic stat that has not yet started putting in a bottom. Find stocks you like and buy them. I have no idea why the market yesterday was so strong, and it looks like there will be follow-through today. Most pundits and pros are calling for a correction and maybe we'll get one. Maybe we won't.

One thing I do know is that valuation is always important but is rarely the most important element in whether a stock goes up or down in the short term. Stocks are down so much and at the economic climate is and will be changing so dramatically that we are probably in a period when valuation for "good" stocks is as unimportant is it will ever be.



Everybody and their brother is reporting that the best banks, Goldman and the two Morgans (J.P. and Stanley) are closer to their stated goal of repaying the TARP money, despite the fact that Geithner and Obama both sound as though they are backing down from the harshest elements of the bank executive pay restriction idea. The bright side is that one might conclude that from the point of view of managements at these firms, it's not just about how much they can pay themselves.

Monday, May 18, 2009


I was a young analyst when Kulicke & Soffa (KLIC) was viewed as a leading indicator for semis, which means that it was a very long time ago. Some elements that made that construct work back then still work now.

KLIC, who makes equipment for packaging computer chips, reported after the close and took up numbers big time. More fuel for the semi rally.


Can Maureen Dowd be that stupid?


Skype's pending IPO is losing value as I write this. According to unofficial Facebook blog AllFacebook, video chat functionality is being built in to the Facebook and will be ready soon.

Prepare to be spending more time on the site.

Cheer Up

That completely uninteresting chart is a 5-year for home improvement retailer Lowe's, which reported a great quarter this morning.

Look for the stock to open a lot higher. The idea that housing is bottoming continues to get harder and harder to disagree with.

Long Shot

How could we have avoided the subprime crisis and the Madoff mess? Better regulation. Not more regulation but smarter regulation. Even though getting there is very much the focus of the folks now in charge, I am not overly optimistic that it will happen.

"May 18 (Bloomberg) -- BlackRock Inc. and Bank of New York Mellon Corp. are competing to become the world’s biggest money manager as stock markets show signs of recovery.

Each company is in talks to buy Barclays Plc’s fund unit, whose $1.5 trillion in client assets ranks highest in the industry.."

As the above Bloomberg report points out, BlackRock or BNY will likely to buy Barclays' asset management division, which is 100% for sale. I don't have much experience with BNY but I know for a fact that BlackRock is a very smart company. Part of the genesis of the subprime mess was that the investment banks packaged lousy loans into complex time bombs that neither the customers nor the ratings agencies could understand (or maybe they didn't take the time to).

Is it possible that there could be a customer so big that it plays to role of cop in the marketplace?, i.e. don't even bother if you can't sell it to BlackRock?

Probably wishful thinking.


I woke up at 5:30 and I'm running late already. Great tone to the futures this morning.


Morgan Stanley just ungraded semis and semi equipment. Nothing new in the upgrade, nothing new to stop these stocks in the intermediate term.

Sunday, May 17, 2009

Three Cheers for Reddit

Online news aggregator and ranker Reddit moved up a few notches on my list this week. If you have received an unsolicited call or 46 that your auto warranty is about to expire, it's good news for you too. Reddit users banded together in protest to get back at auto warranty company Auto One, according to the Wall Street Journal:

"Using phone numbers for Auto One Warranty Specialists Inc. that users posted to a Web site called, Mr. Silveira joined dozens of activists who have peppered the warranty company with messages including elevator music, threats and offers of rude services.

"I thought, if you get a bunch of people together, you could blow up their voice-mail boxes," says Mr. Silveira.

The recipient of their efforts is David Tabb, the 42-year-old president of Auto One, an Irvine, Calif., warranty company with 60 employees. He says Reddit users overloaded his phone lines with computerized calls, changed voice-mail greetings on his company's system, and even threatened arson. People have been conspicuously honking outside his home, he says. To cope, he redirected some of the numbers that activists had been calling."

Ha ha.

Saturday, May 16, 2009

A Child's Prayer for Fathers' Day


Dear God:

This year, please send clothes for all those poor ladies in Daddy's computer.



Friday, May 15, 2009

Sticker Shock

In reverse. Computer hardware prices come down every year. No big deal, it's a deflationary industry. They have come down so fast over the last 12 months that they are now hard to believe. I just got this email from Dell. Laptops under $500, desktops under $400, storage is almost free.

The level of hardware deflation makes me even more optimistic about the prospects for Apple's media tablet or notepad or whatever it's going to be in the 2nd half of the year. If you can get your "computing" stuff cheap, you can afford to spend more on "cool" stuff. Apple is still cool and becoming mainstream at the same time. Quite an act.

I still like the Amazon short against it as well. Kindle should lose a lot of momentum as Apple enters the fray.


Futures were up big and are now flat on no news. Well, some insurance companies are getting some TARP money but that's not a game changer. I didn't trust the early strength and still think the market is tired. I'd take a flat day today.

Thursday, May 14, 2009

A Thousand Words

The S&P 500 is at the bottom of its recent upward channel. (Chart from Helene Meisler at Time for a more significant correction? Probably. The Nasdaq (not pictured) has already broken similar short term support.

Bespoke Investment Group
(BIG) has a poll on their blog this morning asking readers about their opinion on the amplitude of the selloff that we are in. How low will we go? It is interesting that one in five readers believes that this move is the beginning of the market making new lows.


That market yesterday was awful. The day did offer terrible April retail sales numbers just as many market participants were feeling better about a light at the end of the tunnel. The real wet blanket in my opinion was the multi-front attack on U.S. consumers and businesses being threatened by the current administration - more (but not necessarily better) regulation and still more taxes.


Oil, which has made a quick run from about $40 to the high $50s, traded through $60 yesterday for a couple of minutes then got turned back. 50% moves used to be a big deal.

Futures are flattish ahead of another big jobs number and Walmart report this morning. I'm heading to New York at some point. Later.

Wednesday, May 13, 2009

Intel EU Decision

The European Union's antitrust folks just handed down their decision on whether Intel has played fair over the last decade or so. Intel has been found guilty in this round. The fine is close to $1.5 billion dollars (the biggest antitrust fine ever I hear), which sounds to me like a number that the prosecutors thought Intel could afford rather than one based on actual damages.

Undoubtedly Intel will appeal. AMD has been struggling so anybody looking at the situation could stretch their view of the playing field to favor AMD. If you lose every time, the other guy must be cheating, right?

The real point here is as follows: Intel is too big for AMD to fail. I wouldn't sell Intel on this news if I owned it (I don't) but I might buy AMD. Heck, AMD is so cheap that its P/E is negative.
I think I just heard that Geithner is speaking at a Rotary Club meeting today.

Tuesday, May 12, 2009

The Backboard is Broken

But I don't think that is why the kids were not playing basketball after school yesterday.

According to some rudimentary googling, that is a broad winged hawk.

They weren't using the swing set either.

Oh By The Way

If you are reading this, I would like to congratulate you on not contracting a deadly strain of the Swine Flu.

What a crock that whole news cycle was. You can go back to licking the doorknobs now.


/permabear David Tice is on Bloomberg TV right, sticking his neck waaaaay out there.

His call is that the S&P 500 goes to 400 and "I've never been more confident of anything in my life." I find it comical that there are extremists who have that much confidence. Do I blame him? Tice's fund was up over 20% last year and as the saying goes, you have to dance while the music is playing.

Bad News Week/Month For Google

Today, the Wall Street Journal and others are reporting on how Google is pulling the plug on its radio advertising efforts. They failed due to their lack of ability to measure audience response, which makes perfect sense but didn't stop Google from trying.

In the past few weeks a new search engine and new search construct have gotten a lot of buzz. "Wolfram Alpha shows data in a way Google can't..." It's too early to say whether there is a Google killer (though there will be at some point) or whether this is it, but you get the picture.

Highly-regarded Tech Blog TechCrunch ran a story with the following headline yesterday: "Google News Gets An Update. Still Sucks."

Now this: "Watch Out Google, Obama’s Antitrust Chief Is Looking To Make An Example Out Of You" I think this is for real.

What's the real problem here?

  • Google's search market share is too high?

  • Google's internet ad share is too high?

  • Google has too much personal info/market info/influence?

  • Google is a large and easy target?

  • The Dems need a high profile healthy opponent?

Yes to all. It's not easy to stay out of the crosshairs when you're that big.

Monday, May 11, 2009

Gloomy Monday and Semis

As we start the week, Asian and European stocks are mostly lower, U.S. Futures are lower, oil is lower, gold is lower. There is no big news, no good news, no earnings news and the banks are quiet. In short, it's a perfect morning to test whether the buyers of stocks need a break. It looks like they do.

I have been positive on the semiconductor trade from a cyclical perspective and was thinking that maybe it was time to take it off. The chart pictured is a 6-month view of the Semiconducor Holdrs ETF (black bars) vs. the S&P 500 (red line). The outperformance is hardly shocking, which makes me inclined to hang in there.

I am looking for more a-cyclical ideas, though.

Sunday, May 10, 2009

The Easiest Stories to Write


"The economic downturn is forcing a return to a culture of thrift that many economists say could last well beyond the inevitable recovery."

From this morning's NY Times. Jeez. I'll take the other side of that. I'm beginning to think that recency effect is a cognitive bias only really practiced by the media. Things have been bad so they're going to stay bad for a while. Get it? See what I did there? The more difficult story to write, but one that is much more likely to happen, is as follows:

  • U.S. banks and consumers took on too much leverage over the 15 years leading up to 2006
  • Just as the banks need to get their balance sheets into shape, U.S. consumers need to do the same. They are doing it
  • I guarantee you that there are consumers everywhere that feel punished that they have been foregoing Starbucks, or aren't putting in a pool this year, or are only going to Europe for one week this summer
  • It will vary consumer-to-consumer, but once debt levels are reduced and the economy is better, big spending levels and low savings rates will come back with a vengeance

Americans suck at saving.


CNN is now reading viewer Tweets on the air. The democratization of media continues and I am not a fan. Reading viewer email is one thing, but still something in which I have no interest. Some emails though are thoughtful and provocative. Tweets are generally 140 character-max smartass comments. If I want those, I can go out drinking with my friends. Silly me but I'm kind of looking for the opposite from CNN.


Happy Mothers' day. I'm going to play golf.

Saturday, May 9, 2009

The Players Championship

I have played Sawgrass a couple of times. If I never play #18 on that course again, that will be OK with me. That hole is a beast.

I think Tiger is going to treat his flair for the dramatic to a nice dinner tonight. No predictions...

Friday, May 8, 2009

Sibling Non-rivalry

My brother Tim is a little crazy.

Get your Friday taste of crazy over here. The list rocks.


Happy Friday. The stress test results were a snoozer. The country and markets can now easily shrug off an extra $75 billion.

Futures aren't doing much as the news flow is pretty quiet this morning. The jobs number will be the focus this morning but the lower new jobless claims number reported earlier has already trumped today's data.

Where is Obama this week? It was nice to not see him on TV every day.

Vince Farrell is on the tube right now calling for a pullback. It seems like everybody is calling for a pullback. When it comes to the market, if everybody is looking for something, they usually don't find it. Just sayin'.


This oil trade, which I'm not involved in but have been wrong on in the last couple of weeks, is very hard. The only thing that makes sense to me, given the recent rise in crude despite high inventories and weak current economic data, is that the economy is going to get better in a hurry. Or at least that could be the way oil speculators are betting.

Thursday, May 7, 2009

Internet Explorer 8

As I was struggling with a virus a couple of weeks ago I downloaded the latest version of Microsoft's Internet Explorer, IE 8. I hate it.

  • When you open a new tab, it takes forever. The software is busy populating the tab with thumbnails of sites you have visited and a list favorites you have used. Ugh
  • Typing a URL in the address bar is next to impossible. The software is trying so hard to guess what you are trying to type that I almost never get it right
  • I can't copy and paste into Blogspot's "compose" window. This is a big deal since I don't have many original ideas. I have to go to the "edit html" window then toggle back after pasting. Don't even ask me how I figured that out.

I'd like to finish by saying, "On the other hand, feature x is great," but I haven't found one yet.

I think it's time to study a little Firefox this weekend.

November 12, 1999

"WASHINGTON — Congress should create an oversight council made up of the nation’s top financial regulators to scrutinize “too big to fail” institutions for risky practices that could lead to the next financial crisis, the chairwoman of the Federal Deposit Insurance Corporation told a Senate committee on Wednesday."

The above is from today's NY Times and has a lot to say about how difficult it is and has been to monitor and control systemic risk in today's financial markets. The funny is that Glass Steagall, the act that prevented banks from engaging in some types of businesses, was repealed in 1999, moving us away from the idea that some institutions should control risk (banks) and some institutions should take risks (investment banks et al).

The new system whereby we encourage everyone to take big risks then throw taxpayer money at the problem once it craps out is miserably flawed. Sheila Bair is a smart cookie but the rank and file at Lehman, Bear Strearns and AIG were the best and brightest out there and you could argue that they could not fathom the risk on their own books. Good luck with the rank and file regulators doing it, and no offense to them. No quick fix.

Stress Test Results Day

The bank stress test results are being released at 5 pm today. I can't wait until it's over. The whole process has been tiresome every step of the way:

  • Banks are supposed to be testing their own capital levels constantly
  • The regulators are supposed to be doing the same. Were they ever?
  • Selective results have been leaked, especially to the Wall Street Journal, every step of the way
  • If the Fed says a bank needs money, they might be wrong
  • If the Fed says a bank needs money, the bank might disagree
  • If the Fed tells a bank to raise money, the bank might not be able to
  • If the Fed tells a bank to raise money, the bank might refuse

I can't imagine a real surprise at 5 pm given the furious pace of leaks over the last couple weeks.


There are plenty of people reporting this week that there has been a huge surge in insider selling. Corporate execs selling their own stock is sometimes a sign that they believe the stock is fully valued and in such cases should net be ingored. That is not an easy conclusion to come to since execs are among the worst-diversified investors on the planet. Add to that the fact that many execs borrow against the stock they own and you have cases where last year's sickening decline followed by this year's 30% pop makes selling some stock the investment equivalent of a sigh of relief.

If you're not sure how to interpret a specific case of insider selling, ask yourself what you would do in the same situation - as an investor, not an exec.

Wednesday, May 6, 2009

This is Interesting

An Irish student was studying globalization last semester and wanted to prove that journalists use the internet as a primary source of research (who doesn't)? Well, they do, and apparently don't double-check sometimes, even when the data comes from Wikipedia. Anybody can contribute "facts" to Wiki, which is kind of bizarre when you think about it. Article here.

"A WIKIPEDIA hoax by a 22-year-old Dublin student resulted in a fake quote being published in newspaper obituaries around the world.

The quote was attributed to French composer Maurice Jarre who died at the end of March.

It was posted on the online encyclopedia shortly after his death and later appeared in obituaries published in the Guardian, the London Independent, on the BBC Music Magazine website and in Indian and Australian newspapers."

Those journalists screwed up obviously. If an American paper had done this, I'm pretty sure a Congressinal hearing on how the interweb is rigged would be forthcoming. Is it good or bad that there's no global higher power when it comes to Wiki, or web-as-a-factual-medium? I'm not so sure. I mean, who would you want to be in chage?


Finally a day without rain.

This is Harsh

It looks like the SEC wants the guys who busted their money market fund, Primary Reserve, to do some jail time. They were charged with fraud yesterday.

"Senior officials of the $63bn US money market fund whose implosion last September helped deepen the global financial crisis were charged with fraud on Tuesday by the Securities and Exchange Commission.

The SEC’s civil fraud complaint said: “Over a two-day period ... defendants engaged in a systematic campaign to deceive the investing public into believing that the Primary fund ... was safe and secure despite its substantial Lehman holdings.”"

It is important to note that while fraud, if proven, is bad for sure, investors in this case weren't actually hurt that badly. They lost about 3 cents on the dollar. Maybe the SEC can wrap this up quickly and go after some real bad guys.

Tuesday, May 5, 2009

Tough Kids Rule

Those are my boys.

The one on the right, who is named Riley, is 11 now. When he was 6 or 7, around the time that picture was taken, the following happened.

It was late afternoon. I was in the office at home playing a poker tournament online. My wife was making dinner and the boys were in the playroom having a snack and watching TV. One of Riley's front teeth was so loose that he couldn't eat his snack and he was howling about it. Of course I was trying to ignore it so I could focus on what I was doing.

He wouldn't stop yelling and was driving my wife crazy. I heard her shout, "Riley, go see daddy."

He came into the office and I asked him what was wrong. He told me and I said to come over because I was going to pull it. He approached with some trepidation and allowed me to try and pull it but I couldn't get a grip with my bare fingers. I told him to go get a tissue and probably made some promises that it wouldn't hurt.

He came back with the tissue and bravely allowed me to yank out the offending tooth. It made a kind-of-sickening crunch sound as it came free, but maybe that is too much information. After I was done I took a look and I had pulled the wrong tooth. I guess the other one was a little loose also.

I started laughing and said, "Get back over here, I pulled the wrong one." To this day I can't believe that he did come back over. The original loose one was immediately yanked also. I have a pic of him with no front teeth but can't find it.

That is all.

RIMM, Apple, Google

It sounds as though the RIMM analyst meeting went well yesterday. JP Morgan upgraded the stock and Merrill took the price target from $80 to 100. Good times. Merrill is more constructive on the product roadmap and not just the margin story, and therefore RIMM's competitive position versus Apple, but the analyst was already recommending it so take it for what it's worth.

The NY Times is reporting that the Federal Trade Commission has launched an investigation into whether the boards of Google and Apple share enough members as to be anti-competitive. I'd rather someone tackle the question of whether the average board (not of these two companies) actually has any oversight responsibility, but maybe that will never happen.

401(k) Backlash Coming

There is an article in today's WSJ about how some 401(k) plan sponsors are suspending withdrawls or limiting the amount that investors can withdraw annually. It's pretty outrageous, really.

When hedge funds last year implemented gating in an attempt to avoid full-bore fire sale mode, not too many folks were up in arms because this mostly affected institutions and the super-rich. Now it is happening to mom and pop.

I think a story that is going to be written a lot over the next year is that investing in a 401(k) plan is a bad idea. This is not my opinion but I can see how one can get there. The benefits of a 401(k) are well-know. You contribute pre-tax dollars, the annual limit is high relative to IRAs, the gains grow tax-free, sometimes your employers match all or a portion of your contribution.

The negatives, other than the fact that some people as noted above cannot readily access their money?

  • Plan participants get almost no help with their allocations, and most people know little about investing
  • Tons of people allocate poorly and novice investors are often hurt the most by bear markets
  • Investors have actually lost money on some of the contributions they have made in the last two decades, over long investment periods
  • The fees paid, as 60 Minutes pointed out last month, to the fund managers and the plan sponsors/admins, are considerable

If no big insurance compny fails (other than AIG which no longer counts), look for the annuity industry to emerge as a real rival.

Monday, May 4, 2009

Blackberry Day

Blackberry maker Research in Motion holds its annual analyst day today. I wrote previously that I expect a period of margin discipline as the company looks for a new or incremental growth driver. The company is still growing rapidly, which deserves high praise in this environment.

I'm not sure how to clean up that chart, but it's from Google Trends. The top (blue) line if searches for "iPhone". The red line is searches for "Blackberry". The battle is still on. Kudos to Google for making cool apps like these available and free.

If new news on the product roadmap is coming any time soon, look for it today. That last sentence is so obvious that there is a good chance the stock is weak today no matter what the news. The stock has had a big run.

More later.

The Market in Pictures

Lots of people are concerned about the strength of the rally that we've had since early March - up a cool 30%. While I won't fault anybody for being in capital preservation mode, you can still hardly see the move on the S&P 500 10-year chart.

Sadly, not counting dividends, the index is down over 30% over the last 10 years, which definitely isn't in most investors' playbook.

If you want this market lower, you're probably hoping that BofA and Citi are unable to raise the non-government money that they are looking for. Futuers are strong in the face of that, though.


The New York Times is said to be closing the Boston Globe and raising prices on NYT paper version again. I think we won't have too much broadsheet to kick around for much longer.

Friday, May 1, 2009

Happy Friday

"Pandemic Pushes Global Plan to the Limit"
Financial Times Headline

You be the judge.

Commercial Real Estate

This could work. The Wall Street Journal is reporting today that the Fed is considering using TALF funds for the commercial real estate market - a move which could easily help avoid the worst outcome in this sector.

If you're still super negative, it's easy to point to commercial real estate as being the next shoe to drop. The argument that [ ] will get worse before it gets better always sounds good to some people. It is tough or even stupid for any bank to make new commercial real estate loans when existing, performing real estate loans are trading at junk bond yields, so this could easily be an area where a little pressure would go a long way.

"If you are going through hell, keep going." Winston Churchill


Warren Buffet's Berkshire Hathaway annual meeting is tomorrow. I'm willing to bet you a box of popcorn that he is going to be all bulled up about the economy (and maybe stocks), and that he is going to put a lot of money to work over the next 12 months.